Economy

The United States has just recorded a staggering $316 billion budget deficit in May, making it the third-largest monthly deficit in the nation's history. This significant shortfall pushes the 12-month budget gap to an alarming $2 trillion, despite the government collecting record tariff revenue.
These figures underscore rapidly escalating fiscal pressure on the U.S. economy. The widening deficit, even with robust tariff collections, highlights persistent imbalances in government spending and revenue. This trajectory raises concerns about long-term fiscal sustainability and potential implications for economic stability.

#USDeficit #FiscalCrisis #NationalDebt #Economy #BudgetGap

🔹 Tensions between Donald Trump and Federal Reserve Chair Jerome Powell are heating up. Trump has repeatedly criticized Powell for delaying interest rate cuts – and speculation about a potential replacement is gaining traction. Who could be next to lead the U.S. central bank?

⚖️ Trump vs. Powell: A Clash Over Tariff Policy
Donald Trump has long called on the Fed to cut interest rates, especially in response to his implementation of new import tariffs. He points to the European Central Bank’s ten rate cuts as a benchmark, suggesting the Fed is falling behind.
Powell, however, insists that the Fed must first evaluate the impact of tariffs on the economy before making any drastic policy moves. This disagreement has fueled rumors of Trump possibly removing Powell from his post – but it’s not that simple.

🏛️ Can Trump Really Fire Powell?
Despite the president’s powerful role, the Federal Reserve is an independent institution, and the chair cannot be dismissed at will. The U.S. Supreme Court recently reaffirmed this independence, noting that the Fed operates differently from typical federal agencies.
This means Powell is likely to remain in office until his term ends in May 2026. Nevertheless, Trump has already started vetting potential successors, and informal interviews have reportedly begun within his economic advisory team.

🧠 Who Could Replace Powell?
According to White House economic correspondent Brian Schwartz, the following candidates are under consideration:
🔹 Kevin Warsh – Former Fed governor

🔹 Kevin Hassett – Former head of the National Economic Council

🔹 Christopher Waller – Current Fed governor

🔹 David Malpass – Former World Bank president

🔹 Scott Bessent – Trump’s top choice for Treasury Secretary
Each of these candidates is known for their strong economic backgrounds and Republican alignment, making them favorable in Trump’s eyes – although each faces their own hurdles.

📊 Market Predictions: Who’s in the Lead?
On the prediction market platform Polymarket, investors are already betting on who might succeed Powell. The current odds show:
🔹 Kevin Warsh – 23%

🔹 Christopher Waller – 21%

🔹 Kevin Hassett – 17%

🔹 Scott Bessent – 11%

🔹 Judy Shelton – 10%
Interestingly, there’s also a 16% chance that no replacement will be named this year, suggesting the decision may come in 2026 or just ahead of Powell’s term expiration.

🧠 What Does This Mean for the Markets?
While Powell continues to pursue a cautious monetary policy, Trump is already thinking ahead, aiming to position someone more aligned with his economic agenda. The next Fed chair will play a critical role in shaping U.S. monetary policy – and that choice could have ripple effects across the global financial system.

#Fed , #JeromePowell , #DonaldTrump , #FederalReserve , #economy

Stay one step ahead – follow our profile and stay informed about everything important in the world of cryptocurrencies!
Notice:
,,The information and views presented in this article are intended solely for educational purposes and should not be taken as investment advice in any situation. The content of these pages should not be regarded as financial, investment, or any other form of advice. We caution that investing in cryptocurrencies can be risky and may lead to financial losses.“

The United States is bracing for a major wave of debt issuance. If the debt ceiling is lifted, the U.S. Treasury could issue up to $1 trillion in new government bonds during the second half of 2025. Markets are already on alert, and traders on Wall Street are closely watching the potential impact.
🔹 Most of this issuance will be in short-term instruments – especially Treasury bills maturing in one year or less. While these can be issued quickly, they also challenge market demand due to the sheer volume.

Trump's Fiscal Plan Driving the Deficit Higher
President Donald Trump is pushing a major tax and spending package through Congress. According to the Congressional Budget Office, the plan would increase the federal deficit by $2.8 trillion over the next decade. While the bill may support the economy in the short term, it will also require additional government borrowing – adding further pressure on debt issuance.
Treasury Secretary Scott Bessent said the Senate could vote on the bill as early as Friday, with the House expected to follow. The key event hanging over the debate is the so-called "X-date" – the point when the U.S. government runs out of borrowing capacity under the current ceiling. That date is projected between July and August.

Massive Bond Supply Could Shake Markets – $1 Trillion Incoming
According to Mark Cabana of Bank of America, a "sharp acceleration" in bond supply is imminent. He predicts that as much as $700 billion could flood markets just in August and September. A similar forecast came from Gennady Goldberg of TD Securities.
Repo rates could initially dip due to oversupply. However, if demand doesn't keep pace, rates could spike rapidly – especially in the 2-to-7-year maturity range.
Longer-term bonds (10–30 years) are unlikely to see major changes. In fact, Goldberg expects a possible reduction in long-end issuance, while the Treasury focuses on short and mid-term bonds like 2-, 3-, 5-, and 7-year notes.

Cash Is Available – But Will It Flow Into Treasuries?
Money market funds, which now hold a record $7.4 trillion in assets, could theoretically absorb the new debt. But many of these funds have already started shifting away from government debt in favor of private repo trades that offer higher returns.
So, while liquidity exists, it may not go into Treasuries. This mismatch in supply and demand could pose a major risk – just as the government prepares its largest bond issuance in years.

What’s Next?
It all comes down to timing. If Congress lifts the debt ceiling in time and demand holds up, the market might absorb the shock. If not, bond traders are in for a rough ride.

#WallStreet , #bond #market , #TRUMP , #economy

Stay one step ahead – follow our profile and stay informed about everything important in the world of cryptocurrencies!
Notice:
,,The information and views presented in this article are intended solely for educational purposes and should not be taken as investment advice in any situation. The content of these pages should not be regarded as financial, investment, or any other form of advice. We caution that investing in cryptocurrencies can be risky and may lead to financial losses.“

🔹 The Hong Kong Monetary Authority (HKMA) stepped back into the foreign exchange market to defend the city's long-standing currency peg to the U.S. dollar. The Hong Kong dollar slipped below the lower bound of HK$7.85 per USD, triggering immediate action from the central bank.
🔹 In response, HKMA sold HK$9.4 billion (approximately $1.2 billion USD) from its reserves to buy back the local currency and push its value up. This move also reduced liquidity in the banking system, pushing up interbank interest rates—significantly complicating the popular carry trade strategy, where investors borrow in low-interest Hong Kong dollars and convert them into higher-yielding U.S. dollars.

Cheap Hong Kong Dollar Bets Get More Expensive
📉 Until recently, traders could cheaply borrow Hong Kong dollars, convert them into U.S. dollars, and pocket the yield difference. But May and June’s extreme volatility brought this game to a halt. With tighter liquidity and rising interest rates, HKMA is rewriting the rules.
📌 During the previous intervention in May, HKMA faced the opposite issue—a strengthening Hong Kong dollar. Back then, they injected more HKD into the market, slashing lending rates close to zero and fueling a speculator’s dream. Now, the situation has reversed, and the environment is getting much tougher.

Peg Under Scrutiny, but No Changes for Now
📊 Hong Kong’s currency peg, in place since 1983, is a cornerstone of the city's financial system. But May 2025 saw the steepest drop in the HKD since the peg was established, raising questions about its long-term sustainability. Despite this, Chief Executive John Lee Ka-chiu made it clear in early June: the peg isn’t going anywhere.
💬 “Maintaining the peg is crucial to our financial credibility,” Lee stated, aiming to calm market speculation.

Hong Kong Has the Firepower, But the Pressure Remains
💰 With foreign currency reserves exceeding $431 billion, HKMA has ample ammunition to defend the peg. However, carry trades remain tempting—the gap between U.S. and Hong Kong one-month interest rates is currently around 3.4%, drawing global investors into the game.

🧭 While the Hong Kong dollar has returned to its target range, the real question is: How long can it stay there?

#HongKong , #dollar , #economy , #worldnews , #forex

Stay one step ahead – follow our profile and stay informed about everything important in the world of cryptocurrencies!
Notice:
,,The information and views presented in this article are intended solely for educational purposes and should not be taken as investment advice in any situation. The content of these pages should not be regarded as financial, investment, or any other form of advice. We caution that investing in cryptocurrencies can be risky and may lead to financial losses.“

Foreign direct investment (FDI) in the United States dropped significantly in the first quarter of 2025. According to fresh data from the U.S. Department of Commerce, inflows amounted to just $52.8 billion, down from $79.9 billion in the final quarter of 2024.
🔹 This sharp decline in capital inflows coincides with growing uncertainty around President Donald Trump's tariff policies. As businesses reconsider their strategies in response to changing import rules, many are holding off on major investments until clearer guidelines are established.

Temporary Slowdown or Alarming Trend?
Despite the worrying numbers, analysts caution that this slowdown might be temporary. Several major foreign firms are launching new manufacturing projects across the U.S., which could soon turn the tide. One notable example is Japan’s Nippon Steel, which plans to acquire US Steel in a $15 billion deal — a move expected to lift investment figures in upcoming quarters.
The decline in FDI also coincided with a record current account deficit, which reached $450.2 billion in Q1 2025. Companies rushed to import goods in advance of Trump’s proposed tariffs, putting further pressure on the trade balance.

Tariffs Undermine Dollar and Inflate Deficit
In addition to weakened FDI, America’s external trade faces serious strain. Imports surged to an all-time high of $1 trillion, driven by non-monetary gold and pharmaceutical goods. In contrast, service imports dipped slightly due to lower payments for intellectual property licenses.
Economists warn that the combination of a ballooning current account deficit and federal budget shortfalls could undermine the long-term confidence in the U.S. dollar as a safe haven.

Trump: Tariffs Bring Jobs Back to America
President Trump views the situation differently. He argues that aggressive tariffs are motivating companies to bring manufacturing back to U.S. soil, aligning with his “America First” policy to boost domestic industry.
However, economists like Paul Ashworth from Capital Economics remain cautious. While he acknowledges that uncertainty may have affected some investment decisions, he believes the Q1 drop in FDI could be attributed to one-off deals or isolated business transactions, rather than a broader systemic problem.

Still, Ashworth warned: “Prolonged uncertainty over tariffs may cause firms to delay investment even further, potentially weighing on future economic growth.”

#US , #economy , #TRUMP , #Tariffs , #worldnews

Stay one step ahead – follow our profile and stay informed about everything important in the world of cryptocurrencies!
Notice:
,,The information and views presented in this article are intended solely for educational purposes and should not be taken as investment advice in any situation. The content of these pages should not be regarded as financial, investment, or any other form of advice. We caution that investing in cryptocurrencies can be risky and may lead to financial losses.“

Former U.S. Treasury Secretary Steven Mnuchin shared an optimistic outlook on monetary policy during his appearance on CNBC. He expects the Federal Reserve to cut interest rates by 75 to 100 basis points over the next 12 months, stating that markets have already priced in this scenario.

🔹 Fed Taking a Cautious But Clear Path
Mnuchin praised Fed Chair Jerome Powell’s cautious and patient approach. “Inflation, once considered transitory, has shown lasting effects. Powell recognizes this but also sees that conditions now allow for rate cuts,” Mnuchin explained. He believes the rate reductions will be gradual and are already reflected in asset prices.
If there are no major economic surprises, Mnuchin predicts interest rates could decline by a full percentage point.

🔹 Trump Preparing Trade Deals, Tariff Delays Possible
Mnuchin, who handled financial policy during the Trump administration, also revealed that the former president is preparing to announce new trade agreements. He mentioned ongoing negotiations with countries such as China, India, and Japan and suggested that July’s planned tariff hikes could be postponed if progress is made.
“So far, the imposed tariffs haven’t raised inflation. That supports market expectations for lower interest rates,” he added.

🔹 TikTok Deal Likely Without Full Sale
Mnuchin also addressed the ongoing TikTok situation, predicting a solution that doesn't involve a full sale of the platform. Instead, he foresees the involvement of new investors who would reshape the company’s ownership in cooperation with Chinese parent ByteDance. He mentioned that his own investment interests are currently inactive.

🔹 Bond Yields Unlikely to Fall Below 4%
Mnuchin said it's unlikely that yields on 10-year U.S. Treasury bonds will fall below 4%. A decline to the 4.0–4.25% range is possible, aligning with a scenario of gradual monetary easing without drastic policy shifts.
He also reassured that a significant economic slowdown is not expected, and that markets are already reacting to this outlook.

🔹 Tax Cuts and the Need for Growth
Mnuchin emphasized that a major tax package pending in the Senate will be critical for markets. He strongly supports extending the Trump-era tax cuts, calling them essential for economic health.
While acknowledging that long-term debt and deficits pose a serious challenge, Mnuchin believes that if GDP growth stays around 3%, the situation can be managed without drastic spending cuts. However, if growth slows, budget cuts will become inevitable, he warned.

#Fed , #economy , #usa , #USPolitics , #FederalReserve

Stay one step ahead – follow our profile and stay informed about everything important in the world of cryptocurrencies!
Notice:
,,The information and views presented in this article are intended solely for educational purposes and should not be taken as investment advice in any situation. The content of these pages should not be regarded as financial, investment, or any other form of advice. We caution that investing in cryptocurrencies can be risky and may lead to financial losses.“

According to the latest forecast from JPMorgan, the U.S. tariff policy may lead to a painful scenario of stagflation — a toxic mix of stagnant growth and persistent inflation. This warning comes as the bank revises its 2025 U.S. GDP growth estimate down from 2% to just 1.3%.
In its semiannual economic outlook, JPMorgan stated that there is now a 40% probability of a recession in the second half of next year.

Economy Suffers Between Rising Prices and Slowing Growth
Stagflation — a nightmare scenario reminiscent of the 1970s — involves high inflation, weak growth, and rising unemployment, and is notoriously difficult to address using traditional policy tools. JPMorgan now sees this risk rising due to new tariffs introduced in April, which are likely to drive up both import and domestic production costs.
“The stagflationary impulse from higher tariffs was a key driver in our downward revision of the GDP forecast,” the bank stated. “We continue to see elevated recession risks.”

Bond Markets React – and the Fed May Delay Rate Cuts
Fears surrounding the impact of tariffs are already being reflected in bond markets. Yields on 2-year U.S. Treasuries have risen to 3.8%, while 10-year yields are nearing 4.3%, indicating investors are reassessing inflation and interest rate expectations.
Despite this volatility, JPMorgan expects some stabilization by year-end:

🔹 2-year bonds: yields to drop to 3.5%

🔹 10-year bonds: expected to decline to 4.35%
However, the bank also warns of rising term premiums — the extra yield investors demand for holding long-term debt — which could increase by 40 to 50 basis points due to concerns over U.S. fiscal sustainability and waning interest from foreign buyers, including China, Japan, and the Federal Reserve itself.

Rate Cuts? Not Until December — and Slowly
While some market participants are betting on the Federal Reserve beginning rate cuts later this year, JPMorgan remains cautious. With inflation still “sticky”, and tariffs adding upward pressure, the Fed is unlikely to act before December 2025.
🔸 The bank expects a gradual rate-cutting cycle of 100 basis points, extending into spring 2026.
Should the economy weaken more than anticipated, the Fed may need to respond more aggressively. But for now, JPMorgan is preparing for a measured, step-by-step recalibration.

Falling Dollar, Stronger Emerging Currencies? Likely
JPMorgan also offered a bearish outlook on the U.S. dollar, arguing that the greenback could weaken as foreign economies outperform the U.S. thanks to pro-growth international policies. Meanwhile, the U.S. leans toward protectionism and potentially isolationist policies, which may weigh on domestic expansion.
⚠️ The bank warns that the sheer size of the U.S. bond market may become harder to sustain if foreign buyers continue to pull back from U.S. assets.

Tech and AI Keep Equities Afloat
Not all outlooks are grim, though. JPMorgan remains bullish on U.S. equities, citing several reasons for optimism:

🔹 Strong consumer spending

🔹 Robust tech sector earnings

🔹 Persistent investor demand for stocks
Unless there’s a major geopolitical or political shock, JPMorgan believes that technology and AI-driven growth will continue to support equity markets.

#JPMorgan , #Inflation , #US , #economy , #worldnews

Stay one step ahead – follow our profile and stay informed about everything important in the world of cryptocurrencies!
Notice:
,,The information and views presented in this article are intended solely for educational purposes and should not be taken as investment advice in any situation. The content of these pages should not be regarded as financial, investment, or any other form of advice. We caution that investing in cryptocurrencies can be risky and may lead to financial losses.“